Category: Public adjusters (7)

The Florida Supreme Court today sided with an appellate court and struck down a state law barring public insurance adjusters from soliciting business right after a disaster.

The 2008 law was enacted to prevent public adjusters, hired by policyholders to represent them during the claims process, from contacting people when they’re in shock and haven’t had a chance to resolve a claim with their insurer.

Fred Kortum, a public adjuster, sued the state, saying the restriction violates the free speech rights of businesses and the first 48 hours after a catastrophe are critical because a policyholder may make decisions that affect how much they'll receive from an insurer. For instance, they might not preserve evidence or find all the damages.

The Department of Financial Services, led by Chief Financial Officer Jeff Atwater, defended the law, saying public adjusters are driving up insurers' claims costs, which results in rate hikes for consumers.

A key disagreement was about whether the law applies to all forms of contact or just some: “A public adjuster may not directly or indirectly through any other person or entity initiate contact or engage in face-to-face or telephonic solicitation or enter into a contract with any insured or claimant under an insurance policy until at least 48 hours after the occurrence of an event that may be the subject of a claim under the insurance policy unless contact is initiated by the insured or claimant.”

The Supreme Court sided with Kortum on the issue: "The Legislature‘s insertion of the broad phase 'initiate contact' causes us to conclude that [the law] bans all public adjuster-initiated communication with a potential claimant during the forty-eight-hour period. Contact means to 'get in communication with,' to 'make connection with,' or 'to talk or confer with.'"

The court said public adjuster-initiated contact is protected as commercial free speech: "There is no reason for a public adjuster...to contact a claimant but to engage in communication about the commercial transaction of public adjusting."

In short, the court said the law "is not narrowly tailored to serve the State‘s interests in ensuring ethical conduct by public adjusters and protecting homeowners."

Legislators are expected to propose restrictions that could pass constitutional muster. DFS Spokeswoman Alexis Lambert said, “The office respects the Supreme Court’s authority and ruling in this case. No decision on next steps, if needed, has been made."

The Florida Supreme Court is expected to issue a ruling in the coming months on whether a law barring public insurance adjusters from soliciting business right after a disaster violates free speech.

A Tallahassee appellate court ruled it was unconstitutional last year and the Department of Financial Services and its leaders, Chief Financial Officer Jeff Atwater, appealed.

State leaders have said public adjusters, hired by policyholders to represent them during the claims process, are driving up insurer's claims costs, which results in rate hikes for consumers. The state's position is that public adjusters shouldn’t be allowed to contact people when they’re in shock and haven’t had a chance to resolve a claim with their insurer.

Fred Kortum, a public adjuster, sued the state, saying the rule violates free speech rights of businesses and the first 48 hours are critical because a policyholder may make decisions that affect how much they'll receive from an insurer. For instance, they might not preserve evidence or find all the damages.

A key question raised during oral arguments last month is what the law actually says.

The law says: “A public adjuster may not directly or indirectly through any other person or entity initiate contact or engage in face-to-face or telephonic solicitation or enter into a contract with any insured or claimant under an insurance policy until at least 48 hours after the occurrence of an event that may be the subject of a claim under the insurance policy unless contact is initiated by the insured or claimant.”

Michael Davidson, an attorney for DFS, argued it only prevents contact by phone or face-to-face so it's not unconstitutional.

Several justices disagreed with Davidson's interpretation. "The problem you've got with that, with all due respect, is that's just not what it says. It strains credulity to think that's what it says," said Chief Justice Charles Canady. "I understand that might have been what they meant."

"There is the reality [that] there are mortgage players who want sinkhole coverage," Atwater said at a Florida Cabinet meeting. "How does a Floridian go from paying $350, $450 a year to $3,000, $4,000 a year?"

Atwater, a Republican from North Palm Beach, asked Insurance Commissioner Kevin McCarty if he could require Citizens Property Insurance to phase in its proposed 429 percent statewide average rate hike over several years instead of all at once.

McCarty said his office works with companies to see if that makes sense for huge rate hikes but he can't require it. He also said Citizens based its proposed rates on its past losses without taking into benefits of a sweeping new property insurance law that, among other things, caps fees for public insurance adjusters hired by Citizens policyholders to 10 percent.

"They did not contemplate...the anticipated cost savings generated by passage of the new legislation," McCarty said.

A broad property insurance bill to allow insurers to drop full sinkhole coverage and create new restrictions for homeowners filing claims was approved today by the Senate's rules committee and will now head to the full Senate.

Lawmakers concerned about the impact of the bill, SB 408, on consumers removed key provisions of the bill in other committees. It was also watered down today through changes approved by the Senate's rules committee. The changes approved include:

Changing the name of state-backed Citizens Property Insurance to Taxpayer Funded Property Insurance. Lawmakers need to have to some fun, said Sen. J.D. Alexander, R-Lake Wales, before proposing the change. Legislators said provisions of the bill are needed in part to help shrink Citizens' costs because nearly all Floridians are on the hook to pay fees if Citizens has major deficits after hurricanes.

Requiring Citizens to offer full sinkhole coverage for the main structure of a policyholder's property. The change addresses a concern some legislators expressed about people having nowhere to go if private insurers are no longer required to offer full sinkhole coverage, Richter said.

Eliminating a provision of the bill allowing insurers to raise rates if they're losing money because of discounts they gave to policyholders who fortified their homes against hurricanes. Some insurers have already started revoking the discounts based on changes made last year by regulators. Sen. Chris Smith, D-Fort Lauderdale, who proposed repealing the provision, said regulators would still review the fairness of the discount.

The committee rejected Richter's proposed change to make Citizens exempt from a so-called bad faith law that effectively allows policyholders who win lawsuits against the insurer to collect attorneys' fees instead of subtracting the money from the claims payouts. Critics say Citizens delays or lowballs claims at times and should be subject to the same laws that hold private insurers accountable for good customer service.

"If it were proven that because of poor management or [arrogance] that Citizens had acted in a number of occasions in bad faith, I thin it would affect your job because we'd look" to find other managers, said Matt Gaetz, R-Fort Walton Beach. "Why do you think the government should treat people worse than private companies?"

Citizens Spokeswoman Christine Ashburn told legislators the insurer isn't pressured to produce profits or dividends like private insures so it has no incentive to deny claims unfairly. "Whether or not we pay claims doesn’t change my salary or my president's salary," she said.

South Florida legislators said many of the homeowners in their areas don't have an option for property insurance coverage other than Citizens.

"We can't say there's one set of rules for the private market and another" for Citizens, said Anitere Flores, R-Miami. "I just can't put my constituents on an unlevel playing field."

"I have never seen anything in the Florida Legislature that is as anti-consumer as this," added Sen. Gwen Margolis, D-Miami.

State insurance fraud investigators arrested a public insurance adjuster Wednesday in connection with an allegedly fraudulent claim on behalf of a golf course in Miami.

Erasmo Zorilla was hired by the owners of Country Club of Miami to reopen a Hurricane Wilma claim. He told North Pointe Casualty Insurance, the club's insurer, that the tiles on the club's roofs are not available anymore so the roofs would have to be replaced at a cost of $2.4 million.

But investigators said the folks for the tile distributor said no one had ever shown them a sample from that location and the original supplier said the tiles are readily available. "Zorilla stated he conducted his inspection by standing outside of his car and looking up at some of the buildings and seeing some tile damage," Chief Financial Officer Jeff Atwater's office wrote in a statement Thursday.

Brian Macomber, an owner of Five Star Public Adjusting, where Zorilla is a contractor, declined to comment on the specifics of Zorilla's case but said he's confident the charges will be dismissed.

He added the arrest, made as the state's legislative session kicks off, may be used to encourage support for legislation restricting public adjusters, who are hired by policyholders in claims disputes with insurers. "Public adjusters have been painted with a criminal brush and accused of fraud. The past few anti-consumer bills are going to devastate policyholders," he said. On Friday, Macomber said Five Star has suspended Zorilla and "fully supports the efforts of Mr. Atwater to root out any fraudulent or unethical activity that may exist in the adjusting industry."

Atwater said the arrest is “yet another example of the unscrupulous insurance fraud schemes pulling money out of the pockets of Floridians and reputable businesses."

Zorilla, who surrendered to state detectives, is charged with grand theft in the first degree and insurance fraud in the first degree, and is being held at the Dade County Jail on $20,000 bail, according to Atwater's office.

Earlier this month, Atwater's office announced that a public adjuster in North Miami Beach plead guilty to first-degree fraud for pocketing more than $360,000 from 82 clients and using the money to pay personal debts.

A Tallahassee appellate court ruled Wednesday that a state restriction on public insurance adjusters, who are hired by policyholders to represent them on claims, is unconstitutional.

The state law, passed in 2008, bars public adjusters from initiating contact directly or indirectly with policyholders during the first 48 hours after an event that triggers a claim.

Frederick Kortum, whose public adjusting firm is in Oviedo, sued the state Department of Financial Services. Kortum argued in part that the first 48 hours are critical because a policyholder may make decisions that affect how much they'll receive from an insurer. For instance, they might not preserve evidence or find all the damages. If the property was damaged severely, the policyholder may not stick around and could move to an unknown address where they may not get information about the option of hiring their own adjuster, the First District Court of Appeal noted, referencing a Pennsylvania Supreme Court ruling on a similar issue.

A trial court agreed with the Department, which said the law only prevents contact by phone or face-to-face. The Department conceded that it would be unconstitutional if it barred all contact.

The appellate court said in its opinion that the law "unambiguously bans all solicitation for 48 hours" and that violates the free speech rights of businesses.

The Florida Association of Public Insurance Adjusters released a statement commending Kortum for filing the suit. "His efforts, and that of the legal team, have made it easier for Florida consumers to get the assistance they need when dealing with insurance losses," wrote David Beasley, president of the group.

Sawgrass, which has about 12,000 policies, is a mutual company so policyholders own the company and will have a chance to vote on the idea by Oct. 19.

In a letter last month to policyholders, Sawgrass said claims involving public adjusters "frequently take substantially longer" to settle and public adjusters may exaggerate damages because their fees are based on a percentage of the claims.

Public adjusters, hired by policyholders in claims disputes with insurers, have been a thorn in the side of Florida property insurers. Insurance representatives say the growth of the public adjusting industry has had a direct impact on the rise of claims costs, which can lead to rate hikes.

"The main reason we're proposing it is that it's taking claims dollars our of our members' pockets," said Sawgrass President James Esse, adding that the company has received hundreds of inquiries from members about the proposal. Public adjusters are paid up to 20 percent of non-catastrophe claims payouts and up to 10 percent of payouts for hurricane claims filed within the first year of a storm.

Public adjusters say they help level the playing field between consumers who may not understand the nuances of insurance policies and insurers with vast resources to fight claims.

Esse said Sawgrass' structure, which is similar to that of State Farm, ensures that claims will be paid. "The way we look at it is since we are owned by our members we have no reason not to pay claims," he said.

Public adjusters say that if Sawgrass is true to its word and pays claims properly, policyholders won't have to hire their own claims representatives.

Florida Association of Public Insurance Adjusters President David Beasley said the letter from Sawgrass includes misleading statements about public adjusters. A member of the group has filed a complaint with state's Department of Financial Services, citing a state administrative rule that says no insurer "shall represent or imply to any claimant that public adjusters are unscrupulous, or that engaging a public adjuster will delay or have other adverse effect upon the settlement of a claim."

PAUL OWERS is a West Palm Beach native who graduated from the University of Central Florida in 1989. He covers the housing market for the Sun Sentinel after spending seven years on the real estate beat for that daily paper just up the road. He has impeccable timing, arriving at the Sun Sentinel on the very day that Hurricane Wilma pummeled South Florida. The real wrath came in early 2006, from readers, when he wrote that the five-year housing boom was over. They argued, cursed and complained before grudgingly admitting he was right.Follow @paulowers

JULIE PATEL covers property insurance and Florida Power & Light Co. for the Sun Sentinel. Julie previously worked at the San Jose Mercury News where she covered race and demographics issues, education, city government and the San Francisco 49ers' potential move to the San Jose area. Julie earned a master's degree in communications at Stanford University and a bachelor's degree at the University of Chicago. Julie was born in India and raised in Chicago. She enjoys dancing, painting, cooking and roller skating.Follow @juliepatel